87% of Ghanaians think the country is going in the wrong direction, according to a survey in April by Afrobarometer. The economy is a big reason. Annual inflation hit 30% in June, its highest for 18 years. This year the central bank has increased interest rates by 4.5 percentage points to 19% but the cedi has nonetheless fallen 28% against the dollar. The government has been slow to face up to the crisis. “We are not going to the IMF, whatever we do, we are not”, declared Ken Ofori-Atta, the finance minister, in February. “We are a proud nation.” In July, the government ate its words and asked the IMF for help escaping the pit of debt it has dug itself. Last year 44% of its revenue went servicing foreign loans. The unsustainable borrowing, naturally, has scared off commercial lenders, leaving it with few options. The new programme will be its 17th since independence in 1957 and comes little more than three years since it graduated from its previous one. All of this might suggest Ghana has made a dog’s dinner of managing its economy. Yet its people are the richest in west Africa, measured by GDP per person. What’s more, politicians regularly and peacefully handover power at elections. This makes it both a poster child for development and democracy and also a macroeconomic basket case. The government insists that today’s crisis is exceptional and not its fault. “We were on a very positive trajectory” before the pandemic, Mr Ofori-Atta tells The Economist. The Russian invasion of Ukraine and the subsequent surge in global inflation compounded the harm, he adds. The IMF had already warned that it was at a high risk of debt distress before President Nana Akufo-Addo took office in 2017. Despite this, his government kept on borrowing. Ghana’s public debt rose from 56% of GDP in 2016 to 63% on the eve of the pandemic in 2019.
SOURCE: THE ECONOMIST